You are on page 1of 28

Investment Office ANRS

Project Profile on the


Establishment of Jam, Jellies and
Marmalade Producing Plant

DevelopmentStudiesAssociates
(DSA)

October 2008
Addis Ababa

Table of Contents
Table of Contents.....................................................................................................2
1.Executive Summary..............................................................................................3
2.Product Description and Application.................................................................3
3.Market Study, Plant Capacity and Production Program.................................3
3.1Market Study...........................................................................................................................3
3.1.1Present Demand and Supply............................................................................................3
3.1.2Projected Demand............................................................................................................5
3.1.3Pricing and Distribution...................................................................................................6
3.2Plant Capacity.........................................................................................................................6
3.3Production Program................................................................................................................7

4.Raw Materials and Utilities.................................................................................7


4.1Availability and Source of Raw Materials..............................................................................7
4.2Annual Requirement and Cost of Raw Materials and Utilities...............................................7

5.Location and Site..................................................................................................8


6.Technology and Engineering ..............................................................................9
6.1Production Process..................................................................................................................9
6.2Machinery and Equipment......................................................................................................9
6.3Civil Engineering Cost..........................................................................................................10

7.Human Resource and Training Requirement..................................................11


7.1Human Resource...................................................................................................................11
7.2Training Requirement...........................................................................................................11

8.Financial Analysis...............................................................................................11
8.1Underlying Assumption .......................................................................................................11
8.2Investment.............................................................................................................................13
8.3Production Costs...................................................................................................................13
8.4Financial Evaluation.............................................................................................................14

9.Economic and Social Benefit and Justification................................................15


ANNEXES..............................................................................................................17

1. Executive Summary
This profile provides basic information on the production of 500 tons of Jam, Jelly and
Marmalade per annum. The total investment requirement of the project is estimated at about Birr
17.2 million; of which Birr 7.8 million is for machinery and equipment while Birr 1.4 million is
the cost of working capital. Based on the cash flow statement, the calculated internal rate of
return (IRR) and simple rate of return (SRR) of the project are 19.2 % and 16.7 %, respectively.
And the net present value (NPV) at 18 % discounting rate is Birr 733 thousand. The plant is
expected to create employment opportunities for about 39 persons.

2. Product Description and Application


Jam, Jellies and Marmalade are bread dressings served alone or together with margarine or fresh
butter. They are processed and preserved fruits that are canned or bottled for distribution. Jams
are prepared by boiling fruit pulp with sufficient quantity of sugar. The final product of jams
should contain no less than 68.5 percent of soluble solids. Jellies are prepared by boiling and
straining the fruit with or without water. Mixing the strained and clear juice extract with sugar
and boiling the mixture to a stage at which it will set to a clear gel. Marmalade is a fruit jelly in
which slices of the fruit or the peel are in suspension. Marmalade is usually associated with the
product made from citrus fruits like oranges and lemons in which shredded peel is included as
the material in suspension. Jam, Jellies and Marmalade are packed either with glass containers or
metallic cans with sizes of 1kg, 500 grams and 250 grams.

3. Market Study, Plant Capacity and Production Program


3.1

Market Study
3.1.1 Present Demand and Supply

The demand for these product is growing with urbanization and change in consumption habits.
Jam, Jellies and Marmalade are widely used by middle class households, hotels, restaurants,
3

boarding schools and hospitals as bread dressings. They are also used in pastries to sweeten
cakes; implies there is also a derived demand for Jam, Jellies and Marmalade by pastries. The
consumption of bread as a breakfast meal is on the rise and the number of pastries is also
increasing at an increasing rate. In particular, big hotels which are growing at a very fast rate are
the major users of Jam, Jellies and Marmalade.
The supply of jams and jellies is composed of imports and domestic production. The domestic
supply comes from one single plant located in the Awash Valley. These local products have
lower qualities and lack verities. A casual observation of shops in major urban areas indicates
that imported jams, jellies and marmalade dominate the market. In the past ten yrs, the domestic
production of jam and marmalade has been declining through out. The main reason for this fall
in production could be the flooding of the market by imports.
Jams, jellies and marmalade are canned products which have considerable weight. As a result,
transporting them long distances increases their prices because of high transportation costs. Since
the raw materials are perishables, plants which produce jams, jellies and marmalade are located
near main fruits growing areas. With a population of nearly 20 million, the market for jams,
jellies and marmalade in the ANRS can support a medium scale jams, jellies and marmalade
processing plant.
Almost all parts of the Amhara Region are suitable for growing different kinds of fruits and
vegetables. Fruits like orange, lemon, banana, etc can grow in many places, where there is a
potential for irrigation. Unfortunately, since these crops do not constitute the main staple food of
the people, they are not grown widely. Until recently, fruits and vegetables have never been cash
crops in all parts of the Region, except in the two or three larger towns.
For the above reasons, farmers did not have strong interest to produce fruits. However, as
urbanization expands and more people live in towns, the consumption of fruits and vegetables
has increased especially during the last 10 years. The demand for such fruits in the Amhara
Region is being met by imports from the Awash Valley and western Wollega which are more
than 700 kms and 400 km from Bahir Dar, respectively. Having Lake Tana and Abay at its
4

center and other rivers flowing throughout the Region, the Amhara Region imports fruits from
far off places in the country. The Region can easily produce fruits not only for its consumption
but for export and for converting the fruits to jams, jellies and marmalade.
Table 3.1 shows the domestic production and imports of Jam, Jellies and Marmalades over the
past ten years.
Table 3.1
DOMESIC PRODUCTION AND IMPORTS OF JAM JELLIES AND MARMALADES
(IN TONS)
Year E.C

Imports

Domestic
Total
Production
1989
NA
1066
NA
1990
28
659
687
1991
97
2867
2964
1992
106
2873
2979
1993
97
1649
1746
1994
122
1172
1294
1995
75
144
219
1996
167
108
275
1997
263
108
371
1998
191
108
299
1999
268
108
376
2000*
422
108
540
Source: Compiled from CSAs Manufacturing and Import Data
* Estimation

As shown in Table 3.1 both the import and domestic productions have been fluctuating in the
past ten years. The highest figures for domestic production are registered during the EthioEriteria war; implies the major target consumer of the local production during the period were
the Ethiopian military force at the war front. Given the existence of fluctuation, however, on
average, local production and imports have shown a decreasing trend and an increasing trend,
respectively. Thus, though both imports and local production of Jam, Jellies and marmalade have
been fluctuating for one or other reason, in the past ten years, there is significant replacement of
the local production by imports. And, this is mainly due to the fact that the local products have
low quality and lack variety as compared to the imported ones.

3.1.2 Projected Demand

Future demand for Jam, Jellies and Marmalade depends on changes in food habits, income
growth and etc. With growth in urbanization, the young generation is developing taste for
pastries which initiate their expansion at a very fast rate all over the country. Bread consumption
also increases with other industrially processed food including Jam, Jellies and Marmalades.
Since there is no data that shows the rate of growth of the major variable, GDP growth rate
(10%) and population growth rate (3%) are applied to project future demand for Jam, Jellies and
Memorable. In this case, the total supply of jam, Jelly and Marmalade in 2000 E.C is taken as a
base figure for projection. Accordingly the projected demand is shown in Table 3.2.
Table 3.2
PROJECTED DEMAND FOR JAM AND MARMALADE (TONS)
Year
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010

At Country Level
572
744
967
1257
1634
2124
2761
3589
4666
6066

At ANRS Level
143
186
242
314
409
531
690
897
1167
1517

As it is shown in Table 3.2 the demand for Jam, Jellies and Marmalade is expected to reach 1634
tons in 2005 E.C and 6066 tons in 2010 E.C at the national level. Similarly, the regional demand
is expected to reach at 409 tons and 1517 tons in 2005 E.C. and 2010 E.C, respectively.

3.1.3 Pricing and Distribution


Currently, the average selling prices of imported Jam, Jellies and Marmalade at super markets
and department stores is Birr 35 per Kg while locally produced Marmalade is being sold at Birr
20 per Kg. With better quality and different verities, as compared to the locally produced one,
the envisaged project can sell its products for Birr 20 at the factory gate.

3.2

Plant Capacity

The annual production capacity of the plant is scheduled to be 500 tons. The production capacity
is based on demand projections made at the national level and regional level, and minimum
economic plant size. Considering the relative preference of most consumers, the product mix of
the envisaged project is planned to be 200 tons of Jam, 100 tons of Jellies and 200 tons of
marmalade. The production capacity is based on two shifts and 275 working days in a year. The
working days are set by considering Sundays, national holydays, annual repair and maintenance
period, and unexpected work interruptions.

3.3

Production Program

The Jam, Jellies and Marmalade producing plant will start operation at 75 % of its capacity in the
first year, and then increase its production capacity to 85 % and 100 % in the second and third
year, respectively. The fact that production equipments are new, and operators usually take some
time to develop the specific skill and know-how, the production build-up program is made to
start at relatively lower level (75%) and the gradually rise to full capacity (100%).

4. Raw Materials and Utilities


4.1

Availability and Source of Raw Materials

Almost all parts of the ANRS are suitable for growing different kinds of fruits and vegetables.
Fruits like orange, grape, mango, lemon, banana, etc can grow in many places, where there is a
potential for irrigation. Other inputs such as sugar will also be obtained domestically. Inputs like
acids, colors and flavor will be imported.

4.2

Annual Requirement and Cost of Raw Materials and Utilities

The basic raw materials and utilities required for the production of 500 tons of Jam, Jellies and
Marmalade in a year are as indicated in Table 4.1.

Table 4.1
RAW MATERIALS AND UTILITIES

Material

Qty.
(Ton)
432

Fruits (orange, apple,


grape, and mango)
Vegetables(cauliflower,
300
tomatoes and lemon)
Sugar
100
Other additives ( salt,
100
citric acid and other
additives)
Packing Cans
1million
pieces
Total Raw Materials

Av. Unit Cost


(000 Br.)
L.C
F.C
2.50

Total cost
(000 Br.)
F.C
L.C
1080

2.50

750

8.00

800
10

1000

0.20

200
1,00
0

2,830

The annual utility requirement and cost are given in Table 4.2.
Table 4.2
ANNUAL UTILITY REQUIREMENT & COST
Utility

Amount

Unit cost

Electricity
Water
Fuel Oil
Total Utilities

100 MWH
1000 m3
200 tons

0.55 Birr/kwh
2.65 Birr/ton
1000 Birr/ton
-

Total Cost
(000 Br.)
55
2.65
200
257.65

5. Location and Site


For its convenience to procure raw materials Shewa-Robit is an appropriate place to establish the
plant.

6. Technology and Engineering


6.1

Production Process

Production of Jam, Jellies and Marmalade under goes four basic processes. First the fruit is
washed in the brushing machine. Then it is screened according to size and peeled. The peel is
then transported by a pumped conveyor and then pulped. The pulped fruit is then to the boiling
vessel where it is mixed with sugar to produce Jam. Marmalade is produced by mixing the
pulped fruit with citric acid and sugar. Jellies are viscous products containing not less than 45 %
of fruit juice and 55 % of sugar by weight. The mixture is concentrated by heat to such a desired
consistency when the contents cool down. The three essential ingredients of jellies are pectin,
acid and sugar which are mixed in certain proportions to give specified physical properties. In all
cases, the products are cooled in a plate type cooler before they are packed and stored.
Alternatively, it is possible to use a technology that process and can a single variety of fruit such
orange at a lower cost of investment. This also requires relatively lesser production manpower.
However, this makes the plant to be dependent up on the availability of the chosen variety.

6.2

Machinery and Equipment

The list of machinery and equipment required in the production of Jam, Jellies and Marmalade
is given in Table 5.1. The total cost of machinery and equipment is estimated at Birr 8,937.2
thousand out of which Birr 7,771.5 thousand will be required in foreign currency.

Table 6.1
MACHINERY & EQUIPMENT REQUIREMENT
No.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23

Item
Conveyor
Washing Tank
Brushing machine
Brushing Conveyor
Screening Conveyor
Scalader
Screener
Peeles
Peeled ped conveyor
Segment conveyor
Hopper
Pulper
Pump
Tank
Circulation pump
Dearator
Plate type cooles
Centrifugal separator
Blending tank
Quick freezer
Storage tank
Refrigerator
Boiler

Qty (no)
1
1
1
1
3
1
3
1
1
1
1
1
2
2
2
1
1
1
1
2
2
2
2

Suppliers Address:
Shiv Engineering
Patel Avenue, Plot No. 165, Right Bhusaria Colony,
Kothrud Bus Depot,Panda Road,Pune-411038,
Maharashatra, India

6.3

Civil Engineering Cost

The overall site area for the proposed plant is envisaged to be 5,000 m 2. The production hall
occupies 2,000 m2; of which, 1,000 m2 is allocated for stores and office building. Estimating the
unit cost (per m2) of building, including expenses for land preparation and associated civil works,
at Birr 2000, the total cost of building construction is calculated to be Birr 6,000,000. Being

10

calculated at Birr 27.60 per square meter( which is the rate for Shewa-Robit), the land lease price
of the total land area 5,000 m2 amounts Birr 138,000; of which 5 % is paid initially while the
balance will be settled within 40 years period, proportionally.

7. Human Resource and Training Requirement


7.1

Human Resource

Manpower requirements for the envisaged plant are indicated in Table 7.1 below
Table 7.1
MANPOWER REQUIREMENT
Post
Plant Manager
Technologist
Administrator
Engineer
Cashier
Clerks
Mechanics
Operators
Secretary
Guards
Benefits 20%
Total Annual Salary Expenses

7.2

No
1
1
1
3
1
3
9
12
2
6

Salary/Month
(In Birr)
3000
2500
2000
1800
750
600
900
600
800
300

39

Annual Salary
Expenses
(In Birr)
36000
30000
24000
64800
9000
21600
97200
86400
19200
21600
81,960

491,760

Training Requirement

Training of manpower can be carried out at by hiring two experts in the area from abroad.

8. Financial Analysis
8.1

Underlying Assumption

The financial analysis of Jam, Jellies and Marmalade producing plant is based on the data
provided in the preceding chapters and the following assumptions.

11

A. Construction and Finance


Construction period

2 years

Source of finance

40% equity and 60% loan

Tax holidays

2 years

Bank interest rate

12%

Discount for cash flow

18%

Value of land

Based on lease rate of ANRS

Spare Parts, Repair & Maintenance

3% of fixed investment

B. Depreciation
Building

5%

Machinery and equipment

10%

Office furniture

10%

Vehicles

20%

Pre-production (amortization)

20%

C. Working Capital (Minimum Days of Coverage)


Raw Material-Local

30 days

Raw Material-Foreign

120 days

Factory Supplies in Stock

30 days

Spare Parts in Stock and Maintenance

30 days

Work in Progress
Finished Products
Accounts Receivable
Cash in Hand
Accounts Payable

10 days
15 days
30 days
30 days
30 days

12

8.2

Investment

The total investment cost of the project including working capital is estimated at Birr 17.2
million as shown in table 8.1 below. The Owner shall contribute 40 % of the finance in the form
of equity while the remaining 60 % is to be financed by bank loan.
Table 8.1
Total Initial Investment
Items
Land
Building and Civil Works
Office Equipment

L.C

F.C
6,900

6,900

6,000,000

6,000,000

100,000

100,000

Vehicles
Plant Machinery & Equipment
Total Fixed Investment Cost
Pre-production Capital
Expenditure*
Total Initial Investment
Working Capital at Full Capacity
Total

Total

1,165,700

7,771,500

8,937,200

7,272,600

7,771,500

15,044,100

363,630

752,205

7,636,230

7,771,500

15,796,305

969,082
8,605,312

436,364
8,207,864

1,405,446
17,201,751

*Pre-production capital expenditure includes - all expenses for pre-investment studies, consultancy fee during
construction and expenses for companys establishment, project administration expenses, commission expenses,
preproduction marketing and interest expenses during construction.

The foreign component of the project accounts for Birr 8.2 million or 47.7 % of the total
investment cost.

8.3

Production Costs

The total production cost at full capacity operation is estimated at Birr 7.4 million (See Table
8.2). Raw materials and utilities account for 55.1 %.

13

Table 8.2
PRODUCTION COST AT FULL CAPACITY
Raw Material Requirement
Cost
1.Local Row Material
2.Foreign

2,830,000
1,000,000

Total Production Cost at full Capacity


Items
Cost
1. Raw Materials

3,830,000

2. Utilities

257,650

3. Wages and Salaries

491,760

4. Spares and Maintenance

451,323

Factory Costs

5,030,733

5. Depreciation

1,354,161

6. Financial costs

1,032,105

Total Production Cost


8.4

7,416,999

Financial Evaluation
I.

Profitability

According to the projected income statement (See Annex 4) the project will generate profit
beginning from the second year of operation and increases on wards. The income statement and
other profitability indicators also show that the project is viable.
II.

Breakeven Analysis

The breakeven point of the projects is given by the formula:


BEP =

Fixed Cost
Sale Variable Cost

at full capacity.

The project will break even at 30.7 % of capacity utilization


III.

Payback Period
14

Investment cost and income statement projection are used in estimating the project payback
period. The project will payback fully the initial investment less working capital in four years.
IV.

Simple Rate of Return

The projects simple rate of return (SRR) is given by the formula:


SRR= (Net Profit + Interest)/ (Total Investment Outlay) at full capacity utilization.
The SRR would be 16.7 % at full capacity utilization.
V.

Internal Rate of Return and Net Present Value

Based on cash flow statement (See Table Annex 2) the calculated internal rate of return (IRR) of
the project is 19.2 % and the net present value (NPV) at 18 % discount is Birr 733 thousands.
VI.

Sensitivity Analysis

The sensitivity test result which undertaken by increasing the cost of production by 10 % still
indicates that the project would be viable.

9. Economic and Social Benefit and Justification


Based on the foregoing presentation and analysis, we can learn that the proposed project
possesses wide range of benefits that complement the financial feasibility obtained earlier. In
general the envisaged project promotes the socio-economic goals and objectives stated in the
strategic plan of the Amhara National Regional State. These benefits are listed as follows
A. Profit Generation
The project is found to be financially viable and earns on average a profit of Birr 2.1 million per
year and Birr 21.5 million within the project life. Such result induces the project promoters to
reinvest the profit which, therefore, increases the investment magnitude in the region.

15

B. Tax Revenue
In the project life under consideration, the region will collect about Birr 8.5 million from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result create
additional fund for the regional government that will be used in expanding social and other basic
services in the region
C. Import Substitution and Foreign Exchange Saving
The commencement of this project relieves a portion of the import burden. That is, based on the
projected figure we learn that in the project life an estimated amount of US Dollar 9.6 million
will be saved as a result of the proposed project. This will create room for the saved hard
currency to be allocated on other vital and strategic sectors
D. Employment and Income Generation
The proposed project is expected to create employment opportunity to several citizens of the
country. That is, it will provide permanent employment to 39 professionals as well as support
stuffs. Consequently the project creates income of Birr 492 thousands per year. This would be
one of the commendable accomplishments of the project.
E. Pro Environment Project
The proposed production process is environment friendly.

16

ANNEXES

17

Annex 1: Total Net Working Capital Requirements (in Birr)


CONSTRUCTION

PRODUCTION

Year 1

Year 2

70%

90%

100%

100%

0.00

0.00

445257.46

572473.87

636082.08

636082.08

0.00

0.00

142800.00

183600.00

204000.00

204000.00

Raw Material-Local

0.00

0.00

142800.00

183600.00

204000.00

204000.00

Raw Material-Foreign

0.00

0.00

0.00

0.00

0.00

0.00

Factory Supplies in Stock

0.00

0.00

1993.66

2563.27

2848.08

2848.08

Spare Parts in Stock and Maintenance

0.00

0.00

8139.60

10465.20

11628.00

11628.00

Work in Progress

0.00

0.00

49841.40

64081.80

71202.00

71202.00

Finished Products

0.00

0.00

99682.80

128163.60

142404.00

142404.00

2. Accounts Receivable

0.00

0.00

274909.09

353454.55

392727.27

392727.27

3. Cash in Hand

0.00

0.00

22421.89

28828.15

32031.27

32031.27

0.00

0.00

599788.44

771156.56

856840.63

856840.63

4. Current Liabilities

0.00

0.00

274909.09

353454.55

392727.27

392727.27

Accounts Payable

0.00

0.00

274909.09

353454.55

392727.27

392727.27

TOTAL NET WORKING CAPITAL REQUIRMENTS

0.00

0.00

324879.35

417702.02

464113.35

464113.35

INCREASE IN NET WORKING CAPITAL

0.00

0.00

324879.35

92822.67

46411.34

0.00

Capacity Utilization (%)


1. Total Inventory
Raw Materials in Stock- Total

CURRENT ASSETS

Annex 1: Total Net Working Capital Requirements (in Birr)

(continued)

PRODUCTION
5

10

100%

100%

100%

100%

100%

100%

1. Total Inventory

636082.08

636082.08

636082.08

636082.08

636082.08

636082.08

Raw Materials in Stock-Total

204000.00

204000.00

204000.00

204000.00

204000.00

204000.00

Raw Material-Local

204000.00

204000.00

204000.00

204000.00

204000.00

204000.00

0.00

0.00

0.00

0.00

0.00

0.00

Factory Supplies in Stock

2848.08

2848.08

2848.08

2848.08

2848.08

2848.08

Spare Parts in Stock and Maintenance

11628.00

11628.00

11628.00

11628.00

11628.00

11628.00

Work in Progress

71202.00

71202.00

71202.00

71202.00

71202.00

71202.00

Finished Products

142404.00

142404.00

142404.00

142404.00

142404.00

142404.00

2. Accounts Receivable

392727.27

392727.27

392727.27

392727.27

392727.27

392727.27

3. Cash in Hand

32031.27

32031.27

32031.27

32031.27

32031.27

32031.27

CURRENT ASSETS

856840.63

856840.63

856840.63

856840.63

856840.63

856840.63

4. Current Liabilities

392727.27

392727.27

392727.27

392727.27

392727.27

392727.27

Accounts Payable

392727.27

392727.27

392727.27

392727.27

392727.27

392727.27

TOTAL NET WORKING CAPITAL REQUIRMENTS

464113.35

464113.35

464113.35

464113.35

464113.35

464113.35

INCREASE IN NET WORKING CAPITAL

0.00

0.00

0.00

0.00

0.00

0.00

Capacity Utilization (%)

Raw Material-Foreign

Annex 2:Cash Flow Statement (in Birr)

CONSTRUCTION

PRODUCTION

Year 1

Year 2

1865325.00

2329438.35

2794909.09

3318545.45

3639272.73

3600000.00

1. Inflow Funds

1865325.00

2329438.35

274909.09

78545.45

39272.73

0.00

Total Equity

746130.00

931775.34

0.00

0.00

0.00

0.00

Total Long Term Loan

1119195.00

1397663.01

0.00

0.00

0.00

0.00

0.00

0.00

274909.09

78545.45

39272.73

0.00

2. Inflow Operation

0.00

0.00

2520000.00

3240000.00

3600000.00

3600000.00

Sales Revenue

0.00

0.00

2520000.00

3240000.00

3600000.00

3600000.00

Interest on Securities

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

TOTAL CASH OUTFLOW

1865325.00

1865325.00

2841360.34

2900577.08

3217859.14

3096939.06

4. Increase In Fixed Assets

1865325.00

1865325.00

0.00

0.00

0.00

0.00

1776500.00

1776500.00

0.00

0.00

0.00

0.00

88825.00

88825.00

0.00

0.00

0.00

0.00

5. Increase in Current Assets

0.00

0.00

599788.44

171368.13

85684.06

0.00

6. Operating Costs

0.00

0.00

1569764.18

2007709.66

2226682.40

2226682.40

7. Corporate Tax Paid

0.00

0.00

0.00

0.00

234330.54

249431.69

8. Interest Paid

0.00

0.00

671807.72

302022.96

251685.80

201348.64

9. Loan Repayments

0.00

0.00

0.00

419476.34

419476.34

419476.34

10. Dividends Paid

0.00

0.00

0.00

0.00

0.00

0.00

Surplus(Deficit)

0.00

464113.35

-46451.25

417968.37

421413.59

503060.94

Cumulative Cash Balance

0.00

464113.35

417662.11

835630.48

1257044.07

1760105.00

TOTAL CASH INFLOW

Total Short Term Finances

3. Other Income

Fixed Investments
Pre-production Expenditures

Annex 2: Cash Flow Statement (in Birr): Continued


PRODUCTION
5

10

TOTAL CASH INFLOW

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

0.00

0.00

0.00

0.00

0.00

0.00

Total Equity

0.00

0.00

0.00

0.00

0.00

0.00

Total Long Term Loan

0.00

0.00

0.00

0.00

0.00

0.00

Total Short Term Finances

0.00

0.00

0.00

0.00

0.00

0.00

2. Inflow Operation

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

Sales Revenue

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

3061703.05

3037126.04

3001890.03

2547177.68

2547177.68

2547177.68

0.00

0.00

0.00

0.00

0.00

0.00

Fixed Investments

0.00

0.00

0.00

0.00

0.00

0.00

Pre-production Expenditures

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

6. Operating Costs

2226682.40

2226682.40

2226682.40

2226682.40

2226682.40

2226682.40

7. Corporate Tax Paid

264532.84

290292.98

305394.13

320495.28

320495.28

320495.28

8. Interest Paid

151011.48

100674.32

50337.16

0.00

0.00

0.00

9. Loan Repayments

419476.34

419476.34

419476.34

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Surplus(Deficit)

538296.95

562873.96

598109.97

1052822.32

1052822.32

1052822.32

Cumulative Cash Balance

2298401.95

2861275.91

3459385.88

4512208.20

5565030.52

6617852.84

1. Inflow Funds

Interest on Securities
3. Other Income
TOTAL CASH OUTFLOW
4. Increase In Fixed Assets

5. Increase in Current Assets

10. Dividends Paid

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED


CONSTRUCTION
Year 1

Year 2

PRODUCTION
1

TOTAL CASH INFLOW

0.00

0.00

2520000.00

3240000.00

3600000.00

3600000.00

1. Inflow Operation

0.00

0.00

2520000.00

3240000.00

3600000.00

3600000.00

Sales Revenue

0.00

0.00

2520000.00

3240000.00

3600000.00

3600000.00

Interest on Securities

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

TOTAL CASH OUTFLOW

1865325.00

1865325.00

1894643.53

2100532.33

2273093.74

2476114.09

3. Increase in Fixed Assets

1865325.00

1865325.00

0.00

0.00

0.00

0.00

Fixed Investments

1776500.00

1776500.00

0.00

0.00

0.00

0.00

88825.00

88825.00

0.00

0.00

0.00

0.00

4. Increase in Net Working Capital

0.00

0.00

324879.35

92822.67

46411.34

0.00

5. Operating Costs

0.00

0.00

1569764.18

2007709.66

2226682.40

2226682.40

6. Corporate Tax Paid

0.00

0.00

0.00

0.00

0.00

249431.69

NET CASH FLOW

-1865325.00

-1865325.00

625356.47

1139467.67

1326906.26

1123885.91

CUMMULATIVE NET CASH FLOW

-1865325.00

-3730650.00

-3105293.53

-1965825.86

-638919.59

484966.32

Net Present Value (at 18%)

-1865325.00

-1580783.90

449121.28

693515.20

684403.49

491260.89

Cumulative Net present Value

-1865325.00

-3446108.90

-2996987.62

-2303472.41

-1619068.92

-1127808.03

2. Other Income

Pre-production Expenditures

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

(Continued)

PRODUCTION
TOTAL CASH INFLOW

10

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

1. Inflow Operation

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

Sales Revenue

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

2491215.24

2516975.38

2532076.53

2547177.68

2547177.68

2547177.68

3. Increase in Fixed Assets

0.00

0.00

0.00

0.00

0.00

0.00

Fixed Investments

0.00

0.00

0.00

0.00

0.00

0.00

Pre-production Expenditures

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

5. Operating Costs

2226682.40

2226682.40

2226682.40

2226682.40

2226682.40

2226682.40

6. Corporate Tax Paid

264532.84

290292.98

305394.13

320495.28

320495.28

320495.28

NET CASH FLOW

1108784.76

1083024.62

1067923.47

1052822.32

1052822.32

1052822.32

CUMMULATIVE NET CASH FLOW

1593751.08

2676775.70

3744699.17

4797521.49

5850343.81

6903166.13

Net Present Value (at 18%)

410728.85

339988.54

284108.40

237365.18

201156.94

170471.98

Cumulative Net present Value

-717079.19

-377090.65

-92982.25

144382.93

345539.87

516011.85

Interest on Securities
2. Other Income
TOTAL CASH OUTFLOW

4. Increase in Net Working Capital

Net Present Value (at 18%)

516,011.85

21.5%

Internal Rate of Return

Annex 4: NET INCOME STATEMENT ( in Birr)


PRODUCTION
Capacity Utilization (%)

70%

90%

100%

100%

100%

1. Total Income

2520000.00

3240000.00

3600000.00

3600000.00

3600000.00

2520000.00

3240000.00

3600000.00

3600000.00

3600000.00

Other Income

0.00

0.00

0.00

0.00

0.00

2. Less Variable Cost

1480796.38

1903881.06

2115423.40

2115423.40

2115423.40

1039203.62

1336118.94

1484576.60

1484576.60

1484576.60

41.24

41.24

41.24

41.24

41.24

429497.80

444358.60

451789.00

451789.00

451789.00

609705.82

891760.34

1032787.60

1032787.60

1032787.60

24.19

27.52

28.69

28.69

28.69

4. Less Cost of Finance

671807.72

302022.96

251685.80

201348.64

151011.48

5. GROSS PROFIT

-62101.90

589737.38

781101.80

831438.96

881776.12

0.00

0.00

234330.54

249431.69

264532.84

-62101.90

589737.38

546771.26

582007.27

617243.28

Gross Profit/Sales

-2.46%

18.20%

21.70%

23.10%

24.49%

Net Profit After Tax/Sales

-2.46%

18.20%

15.19%

16.17%

17.15%

Return on Investment

15.03%

21.50%

19.03%

18.67%

18.31%

Return on Equity

-3.70%

35.15%

32.59%

34.69%

36.79%

Sales Revenue

VARIABLE MARGIN
(In % of Total Income)
3. Less Fixed Costs
OPERATIONAL MARGIN
(In % of Total Income)

6. Income (Corporate) Tax


7. NET PROFIT
RATIOS (%)

Annex 4: NET INCOME STATEMENT (in Birr):Continued


PRODUCTION
Capacity Utilization (%)

10

100%

100%

100%

100%

100%

1. Total Income

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

Other Income

0.00

0.00

0.00

0.00

0.00

2. Less Variable Cost

2115423.40

2115423.40

2115423.40

2115423.40

2115423.40

1484576.60

1484576.60

1484576.60

1484576.60

1484576.60

41.24

41.24

41.24

41.24

41.24

416259.00

416259.00

416259.00

416259.00

416259.00

1068317.60

1068317.60

1068317.60

1068317.60

1068317.60

29.68

29.68

29.68

29.68

29.68

4. Less Cost of Finance

100674.32

50337.16

0.00

0.00

0.00

5. GROSS PROFIT

967643.28

1017980.44

1068317.60

1068317.60

1068317.60

6. Income (Corporate) Tax

290292.98

305394.13

320495.28

320495.28

320495.28

7. NET PROFIT

677350.30

712586.31

747822.32

747822.32

747822.32

Gross Profit/Sales

26.88%

28.28%

29.68%

29.68%

29.68%

Net Profit After Tax/Sales

18.82%

19.79%

20.77%

20.77%

20.77%

Return on Investment

18.55%

18.19%

17.83%

17.83%

17.83%

Return on Equity

40.37%

42.47%

44.57%

44.57%

44.57%

Sales Revenue

VARIABLE MARGIN
(In % of Total Income)
3. Less Fixed Costs
OPERATIONAL MARGIN
(In % of Total Income)

RATIOS (%)

Annex 5: Projected Balance Sheet (in Birr)


CONSTRUCTION
TOTAL ASSETS
1. Total Current Assets

Year 1
1865325.00
0.00

Year 2
4194763.35
464113.35

PRODUCTION
1
4469672.44
1017450.54

2
4656377.04
1606787.04

3
4822944.69
2113884.69

4
4985475.63
2616945.63

Inventory on Materials and Supplies


Work in Progress
Finished Products in Stock
Accounts Receivable
Cash in Hand
Cash Surplus, Finance Available
Securities
2. Total Fixed Assets, Net of Depreciation
Fixed Investment
Construction in Progress
Pre-Production Expenditure
Less Accumulated Depreciation
3. Accumulated Losses Brought Forward
4. Loss in Current Year
TOTAL LIABILITIES
5. Total Current Liabilities
Accounts Payable
Bank Overdraft
6. Total Long-term Debt
Loan A
Loan B
7. Total Equity Capital
Ordinary Capital
Preference Capital
Subsidies
8. Reserves, Retained Profits Brought
Forward
9. Net Profit After Tax
Dividends Payable
Retained Profits

0.00
0.00
0.00
0.00
0.00
0.00
0.00
1865325.00
0.00
1776500.00
88825.00
0.00
0.00
0.00
1865325.00
0.00
0.00
0.00
1119195.00
1119195.00
0.00
746130.00
746130.00
0.00
0.00

0.00
0.00
0.00
0.00
0.00
464113.35
0.00
3730650.00
1776500.00
1776500.00
177650.00
0.00
0.00
0.00
4194763.35
0.00
0.00
0.00
2516858.01
2516858.01
0.00
1677905.34
1677905.34
0.00
0.00

152933.26
49841.40
99682.80
274909.09
22421.89
417662.11
0.00
3390120.00
3553000.00
0.00
177650.00
340530.00
0.00
62101.90
4469672.44
274909.09
274909.09
0.00
2516858.01
2516858.01
0.00
1677905.34
1677905.34
0.00
0.00

196628.47
64081.80
128163.60
353454.55
28828.15
835630.48
0.00
3049590.00
3553000.00
0.00
177650.00
681060.00
0.00
0.00
4656377.04
353454.55
353454.55
0.00
2097381.68
2097381.68
0.00
1677905.34
1677905.34
0.00
0.00

218476.08
71202.00
142404.00
392727.27
32031.27
1257044.07
0.00
2709060.00
3553000.00
0.00
177650.00
1021590.00
0.00
0.00
4822944.69
392727.27
392727.27
0.00
1677905.34
1677905.34
0.00
1677905.34
1677905.34
0.00
0.00

218476.08
71202.00
142404.00
392727.27
32031.27
1760105.00
0.00
2368530.00
3553000.00
0.00
177650.00
1362120.00
0.00
0.00
4985475.63
392727.27
392727.27
0.00
1258429.01
1258429.01
0.00
1677905.34
1677905.34
0.00
0.00

0.00
0.00
0.00
0.00

0.00
0.00
0.00
0.00

0.00
0.00
0.00
0.00

-62101.90
589737.38
0.00
589737.38

527635.48
546771.26
0.00
546771.26

1074406.74
582007.27
0.00
582007.27

Annex 5: Projected Balance Sheet (in Birr):

Continued

PRODUCTION
TOTAL ASSETS
1. Total Current Assets
Inventory on Materials and Supplies
Work in Progress

5
5183242.58
3155242.58
218476.08
71202.00

6
5441116.54
3718116.54
218476.08
71202.00

7
5734226.51
4316226.51
218476.08
71202.00

8
6482048.83
5369048.83
218476.08
71202.00

9
7229871.15
6421871.15
218476.08
71202.00

10
7977693.47
7474693.47
218476.08
71202.00

10

Finished Products in Stock


Accounts Receivable
Cash in Hand
Cash Surplus, Finance Available
Securities
2. Total Fixed Assets, Net of Depreciation
Fixed Investment
Construction in Progress
Pre-Production Expenditure
Less Accumulated Depreciation
3. Accumulated Losses Brought Forward
4. Loss in Current Year
TOTAL LIABILITIES
5. Total Current Liabilities
Accounts Payable
Bank Overdraft
6. Total Long-term Debt
Loan A
Loan B
7. Total Equity Capital
Ordinary Capital
Preference Capital
Subsidies
8. Reserves, Retained Profits Brought
Forward
9. Net Profit After Tax
Dividends Payable
Retained Profits

142404.00
392727.27
32031.27
2298401.95
0.00
2028000.00
3553000.00
0.00
177650.00
1702650.00
0.00
0.00
5183242.58
392727.27
392727.27
0.00
838952.67
838952.67
0.00
1677905.34
1677905.34
0.00
0.00

142404.00
392727.27
32031.27
2861275.91
0.00
1723000.00
3553000.00
0.00
177650.00
2007650.00
0.00
0.00
5441116.54
392727.27
392727.27
0.00
419476.34
419476.34
0.00
1677905.34
1677905.34
0.00
0.00

142404.00
392727.27
32031.27
3459385.88
0.00
1418000.00
3553000.00
0.00
177650.00
2312650.00
0.00
0.00
5734226.51
392727.27
392727.27
0.00
0.00
0.00
0.00
1677905.34
1677905.34
0.00
0.00

142404.00
392727.27
32031.27
4512208.20
0.00
1113000.00
3553000.00
0.00
177650.00
2617650.00
0.00
0.00
6482048.83
392727.27
392727.27
0.00
0.00
0.00
0.00
1677905.34
1677905.34
0.00
0.00

142404.00
392727.27
32031.27
5565030.52
0.00
808000.00
3553000.00
0.00
177650.00
2922650.00
0.00
0.00
7229871.15
392727.27
392727.27
0.00
0.00
0.00
0.00
1677905.34
1677905.34
0.00
0.00

142404.00
392727.27
32031.27
6617852.84
0.00
503000.00
3553000.00
0.00
177650.00
3227650.00
0.00
0.00
7977693.47
392727.27
392727.27
0.00
0.00
0.00
0.00
1677905.34
1677905.34
0.00
0.00

1656414.01
617243.28
0.00
617243.28

2273657.29
677350.30
0.00
677350.30

2951007.59
712586.31
0.00
712586.31

3663593.90
747822.32
0.00
747822.32

4411416.22
747822.32
0.00
747822.32

5159238.54
747822.32
0.00
747822.32

11